Memphis Real Estate Investing

Earning Passive Income: Real Estate Investment & Protecting Cash Flow

When it comes to earning passive income through real estate investment, there’s little more crucial than protecting the investments that you worked so hard to acquire.

For real estate investors, your streams of cash flow keep your business going. They are what enable you to create the financial future of your dreams: whether that entails funding an investment empire, building the retirement of a lifetime, or simply having everything you need so that money never has to be a worry for you or your children.

Many people choose real estate investment as a means to secure that financial future, but few understand what it takes to protect it.

From the very beginning and all along the way there are things every passive real estate investor must do to ensure that their cash flow is secure.

4 Essential Steps to Protecting Cash Flow in Real Estate Investment

Over-investigate.

Due diligence is always a key to success in any type of investment and especially where real estate is concerned. If you want to maximize your cash flow, it’s vital to truly investigate all of the areas in which you operate. For you, that doesn’t just mean the actual property that you’re considering purchasing. It also means being in-tune with the markets that you want to invest in.

How so, you might ask? It means being in-the-know where the local economy is concerned so that you are able to anticipate shifts in job and population growth—things that both affect property prices and rental costs. As a passive investor, long-term market stability is something you’re after! In a buy-and-hold strategy, you want to ensure that you’re securing reliable cash flow that will last.

Then there’s the need to investigate your partners in your investment journey. As a passive investor, your primary partner is your turnkey real estate provider. There are so many different providers out there that all come with different markets, structures, levels of involvement, payment options, and stipulations. No assumptions can be made.

For you, there’s nothing more important than to ensure that you can trust your provider and that they are giving you the exact services and value that you need.

Over-plan.

Anticipation and planning are great strategies for hedging against risk. Although a turnkey real estate investor rarely needs to involve themselves in the headaches that can arise from their rental properties, it’s always better to be prepared in case you do—for instance, in the case of an expensive repair! Before you even begin to invest, you should overestimate the capital that you’ll need to get started. Always keep a safety net around—funds that you can draw from to cover any eventuality, be it repairs, replacements, or otherwise.

Keep great records.

Part of preserving your cash flow is actually being aware of what’s going on with your investments. Even as a passive investor, you may be surprised how much it pays to know what is going on with your investments. While your property manager may keep you updated month-to-month, it’s on you to keep these records and synthesize that information into something more valuable.

For instance, can you see any patterns that expose where money is being lost or wasted each month? Where expenses are growing out of hand and perhaps where rent should compensate? If you keep and visit your records regularly and are familiar with your numbers, you’ll be able to more readily have your eye on the target.

Invest in great services.

Choosing a property management service over landlording yourself isn’t just a matter of convenience, it’s a matter of liability. For owners, entrusting their properties to managers who know the letters of the law and who are expertly skilled in dealing with properties and tenants is one of the best decisions they can possibly make for the health of their investments.

Services themselves can do a lot to protect your cash flow. Property managers know how to deal with tenants and minimize the chance of legal troubles with them. A lawsuit is something every real estate investor wants to avoid. Even if you come out on top, the cost of going to court in itself is enough to make anyone’s skin crawl.

(Liability insurance helps cover you as well, don’t forget!)

Property managers are also skilled in protecting the heart of your investment: the property itself. Your actual physical asset is at its best when it is both generating passive income and appreciating. While many investment properties have appreciation forced via renovations, appreciation also comes through time and shifting markets. If you’re in a desirable area, appreciation can lead an investor to want to sell.

When your property is in great condition (thanks to excellent upkeep) it’s going to be valued so much higher than a property that has been worn down and neglected.

This is why investing in excellent services are key to protecting your cash flow!

When you make an effort to protect your cash flow, you will find yourself with more passive income, reaching your goals more quickly, and better equipped to achieve the financial future you desire.